SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission file number 1-8729
UNISYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-0387840
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Unisys Way
Blue Bell, Pennsylvania 19424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 986-4011
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES [X] NO [ ]
Number of shares of Common Stock outstanding as of June 30, 2000:
313,013,822
2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions)
June 30, December 31,
2000 1999
----------- ------------
Assets
- ------
Current assets
Cash and cash equivalents $ 182.5 $ 464.0
Accounts and notes receivable, net 1,314.0 1,430.5
Inventories
Parts and finished equipment 236.7 236.8
Work in process and materials 162.7 136.1
Deferred income taxes 481.4 472.7
Other current assets 91.7 105.6
-------- --------
Total 2,469.0 2,845.7
------- --------
Properties 1,654.1 1,723.0
Less-Accumulated depreciation 1,043.8 1,102.2
-------- --------
Properties, net 610.3 620.8
-------- --------
Investments at equity 231.0 225.5
Software, net of accumulated amortization 268.5 259.8
Prepaid pension cost 1,042.6 975.9
Deferred income taxes 655.6 655.6
Other assets 337.1 306.4
-------- --------
Total $5,614.1 $5,889.7
======== ========
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities
Notes payable $ 381.2 $ 26.9
Current maturities of long-term debt 21.2 22.9
Accounts payable 876.6 1,036.7
Other accrued liabilities 987.3 1,183.1
Estimated income taxes 353.1 348.9
-------- --------
Total 2,619.4 2,618.5
-------- --------
Long-term debt 535.8 950.2
Other liabilities 342.4 367.7
Stockholders' equity
Common stock, issued: 2000, 314.9;
1999,312.5 3.1 3.1
Accumulated deficit ( 911.3) (1,054.4)
Other capital 3,627.2 3,575.0
Accumulated other comprehensive
loss (602.5) (570.4)
-------- --------
Stockholders' equity 2,116.5 1,953.3
-------- --------
Total $5,614.1 $5,889.7
======== ========
See notes to consolidated financial statements.
3
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
----------------- ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenue $1,597.1 $1,896.5 $3,265.8 $3,719.3
-------- -------- -------- --------
Costs and expenses
Cost of revenue 1,116.3 1,232.4 2,245.7 2,386.6
Selling, general and
administrative 322.5 345.2 604.0 680.1
Research and development expenses 78.2 84.7 160.3 165.2
-------- -------- -------- --------
1,517.0 1,662.3 3,010.0 3,231.9
-------- -------- -------- --------
Operating income 80.1 234.2 255.8 487.4
Interest expense 18.7 34.7 39.2 68.9
Other income (expense), net 23.9 (17.0) 30.1 (66.3)
-------- -------- -------- --------
Income before income taxes 85.3 182.5 246.7 352.2
Estimated income taxes 29.0 64.5 83.9 124.3
-------- -------- -------- --------
Income before extraordinary item 56.3 118.0 162.8 227.9
Extraordinary item (19.8) (19.8)
-------- -------- -------- --------
Net income 36.5 118.0 143.0 227.9
Dividends on preferred shares 12.0 34.8
-------- -------- -------- --------
Earnings on common shares $ 36.5 $ 106.0 $ 143.0 $ 193.1
======== ======== ======== ========
Earnings per common share
Basic
Before extraordinary item $ .18 $ .39 $ .52 $ .72
Extraordinary item (.06) (.06)
-------- -------- -------- --------
Total $ .12 $ .39 $ .46 $ .72
======== ======== ======== ========
Diluted
Before extraordinary item $ .18 $ .37 $ .51 $ .69
Extraordinary item (.06) (.06)
-------- -------- -------- --------
Total $ .12 .37 $ .45 $ .69
======== ======== ======== ========
See notes to consolidated financial statements.
4
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Millions)
Six Months Ended
June 30
-----------------
2000 1999
-------- -------
Cash flows from operating activities
Income before extraordinary item $ 162.8 $ 227.9
Add(deduct) items to reconcile income before
extraordinary item to net cash (used for)
provided by operating activities:
Extraordinary item (19.8)
Depreciation 71.6 73.7
Amortization:
Marketable software 59.0 58.2
Goodwill 5.4 8.0
(Increase) in deferred income taxes, net ( 8.7) ( 31.0)
Decrease (increase) in receivables, net 94.4 ( 6.2)
(Increase) decrease in inventories ( 26.5) 79.8
(Decrease) in accounts payable and
other accrued liabilities (397.4) (251.3)
Increase in estimated income taxes 4.2 37.6
(Decrease) in other liabilities ( 2.6) ( 10.1)
(Increase) in other assets ( 60.6) ( 74.7)
Other 8.3 19.8
------- ------
Net cash (used for) provided by operating
activities (109.9) 131.7
------- ------
Cash flows from investing activities
Proceeds from investments 343.5 639.3
Purchases of investments (296.8) (618.9)
Proceeds from sales of properties 11.3 11.0
Investment in marketable software ( 67.6) ( 49.6)
Capital additions of properties ( 83.1) ( 78.8)
Purchases of businesses ( 10.9) ( 51.9)
------- ------
Net cash used for investing activities (103.6) (148.9)
------- ------
Cash flows from financing activities
Redemption of preferred stock (181.9)
Proceeds from issuance of long-term debt 30.3
Payments of long-term debt (444.6) ( 2.8)
Net proceeds from short-term borrowings 354.3 12.6
Dividends paid on preferred shares ( 47.0)
Proceeds from employee stock plans 33.7 46.1
------- ------
Net cash used for financing activities ( 56.6) (142.7)
------- ------
Effect of exchange rate changes on
cash and cash equivalents ( 11.4) ( 9.9)
------- ------
(Decrease) in cash and cash equivalents (281.5) (169.8)
Cash and cash equivalents, beginning of period 464.0 616.4
------- -------
Cash and cash equivalents, end of period $ 182.5 $ 446.6
======= =======
See notes to consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the financial information furnished
herein reflects all adjustments necessary for a fair presentation of
the financial position, results of operations and cash flows for the
interim periods specified. These adjustments consist only of normal
recurring accruals. Because of seasonal and other factors, results
for interim periods are not necessarily indicative of the results to
be expected for the full year.
a. The shares used in the computations of earnings per share are as
follows (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
2000 1999 2000 1999
------- ------- ------- -------
Basic 312,515 274,146 311,838 268,425
Diluted 317,021 285,828 317,050 281,830
b. A summary of the company's operations by business segment for the
three and six month periods ended June 30, 2000 and 1999 is presented
below(in millions of dollars):
Total Corporate Services Technology
Three Months Ended ----- --------- -------- ----------
June 30, 2000
------------------
Customer revenue $1,597.1 $1,128.9 $ 468.2
Intersegment $(109.8) 13.6 96.2
-------- ------- -------- --------
Total revenue $1,597.1 $(109.8) $1,142.5 $ 564.4
======== ======= ======== ========
Operating income $ 80.1 $ 4.2 $ .3 $ 75.6
======== ======= ======== ========
Three Months Ended
June 30, 1999
------------------
Customer revenue $1,896.5 $1,380.1 $ 516.4
Intersegment $(154.8) 16.7 138.1
-------- ------- -------- --------
Total revenue $1,896.5 $(154.8) $1,396.8 $ 654.5
======== ======= ======== ========
Operating income $ 234.2 $( .2) $ 114.3 $ 120.1
======== ======= ======== ========
Six Months Ended
June 30, 2000
----------------
Customer revenue $3,265.8 $2,253.9 $1,011.9
Intersegment $(233.9) 24.6 209.3
-------- ------- -------- --------
Total revenue $3,265.8 $(233.9) $2,278.5 $1,221.2
======== ======= ======== ========
Operating income(loss) $ 255.8 $ 17.6 $ 19.4 $ 218.8
======== ======= ======== ========
Six Months Ended
June 30, 1999
------------------
Customer revenue $3,719.3 $2,582.8 $1,136.5
Intersegment $(263.9) 31.3 232.6
-------- ------- -------- --------
Total revenue $3,719.3 $(263.9) $2,614.1 $1,369.1
======== ======= ======== ========
Operating income $ 487.4 $( 8.2) $ 183.9 $ 311.7
======== ======= ======== ========
6
Notes to Consolidated Financial Statements (cont'd)
Presented below is a reconciliation of total business segment operating
income to consolidated income before taxes (in millions of dollars):
Three Months Six Months
Ended June 30 Ended June 30
--------------- -------------
2000 1999 2000 1999
---- ---- ------ ------
Total segment operating income $ 75.9 $234.4 $238.2 $495.6
Interest expense (18.7) (34.7) (39.2) (68.9)
Other income (expense), net 23.9 (17.0) 30.1 (66.3)
Corporate and eliminations 4.2 ( .2) 17.6 ( 8.2)
------ ------ ------ ------
Total income before income taxes $ 85.3 $182.5 $246.7 $352.2
====== ====== ====== ======
c. Comprehensive income for the three and six months ended June 30, 2000 and
1999 includes the following components (in millions of dollars):
Three Months Six Months
Ended June 30 Ended June 30
--------------- -------------
2000 1999 2000 1999
------ ------ ------ ------
Net income $ 36.5 $118.0 $143.0 $227.9
Other comprehensive
income (loss)
Foreign currency
translation adjustment ( 29.3) 15.8 ( 23.5) (43.1)
Related tax expense
(benefit) 5.7 .7 8.6 .5
------ ------ ------ ------
Total other comprehensive
income (loss) ( 35.0) 15.1 ( 32.1) (43.6)
------ ------ ------ ------
Comprehensive income $ 1.5 $133.1 $110.9 $184.3
====== ====== ====== ======
Accumulated other comprehensive income (loss), all of which
relates to foreign currency translation adjustments, as of
June 30,2000 and December 31, 1999 is as follows (in millions of
dollars):
June 30, December 31,
2000 1999
---------------- -----------
Balance at beginning of period $(570.4) $(531.6)
Translation adjustments ( 32.1) ( 38.8)
------- -------
Balance at end of period $(602.5) $(570.4)
======= =======
7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
- ---------------------
The company has experienced a slower-than-expected rebound in its business
over the first half of the year. While the company believes that there is
strong interest in its products and services, it is taking longer than
anticipated to translate this into additional business as customers delay
purchasing decisions on complex e-business initiatives while they finalize
their strategies. In addition, several large technology contracts that the
company expected to receive late in the second quarter were deferred to later
in the year. All of this adversely impacted revenue and margins during the
quarter.
For the three months ended June 30, 2000, the company reported net income of
$36.5 million or $.12 per diluted share, compared to $118.0 million, or $.37
per diluted share, for the three months ended June 30, 1999. The current
period includes an extraordinary item of $19.8 million, or $.06 per diluted
common share, for the early extinguishment of debt. Excluding this item,
income in the current period was $56.3 million, or $.18 per diluted common
share.
Total revenue for the quarter ended June 30, 2000 was $1.60 billion, down 16%
from revenue of $1.90 billion for the quarter ended June 30, 1999. Excluding
the negative impact of foreign currency translations, revenue in the quarter
declined 13%. The decrease in revenue was principally due to continuing
weakness in the company's services business as well as lower sales of
enterprise servers. Total gross profit percent was 30.1% in the second
quarter of 2000 compared to 35.0% in the year-ago period, principally due to
a lower mix of higher-margin products and services than in the year-ago
quarter and reduced utilization of resources due to the lower revenue levels.
For the three months ended June 30, 2000, selling, general and administrative
expenses were $322.5 million (20.2% of revenue) compared to $345.2 million
(18.2% of revenue) for the three months ended June 30, 1999. The decrease in
these expenses reflected continued progress in controlling costs through the
company's worldwide business process standardization program. This led to a
reduction in general and administrative expenses which was partially offset
by an increase in selling expenses. Research and development expenses were
$78.2 million compared to $84.7 million a year earlier.
For the second quarter of 2000, the company reported an operating income
percent of 5.0% compared to 12.3% for the second quarter of 1999.
8
Information by business segment is presented below (in millions):
Elimi-
Total nations Services Technology
------- ------- -------- ----------
Three Months Ended
June 30, 2000
- ------------------
Customer revenue $1,597.1 $1,128.9 $468.2
Intersegment $(109.8) 13.6 96.2
-------- ------- -------- ------
Total revenue $1,597.1 $(109.8) $1,142.5 $564.4
======== ======= ======== ======
Gross profit percent 30.1% 20.5% 44.1%
======== ======== ======
Operating income
percent 5.0% 0.0% 13.4%
======== ======== ======
Three Months Ended
June 30, 1999
- ------------------
Customer revenue $1,896.5 $1,380.1 $516.4
Intersegment $(154.8) 16.7 138.1
-------- ------- -------- ------
Total revenue $1,896.5 $(154.8) $1,396.8 $654.5
======== ======= ======== ======
Gross profit percent 35.0% 25.1% 46.8%
======== ======== ======
Operating income
percent 12.3% 8.2% 18.4%
======== ======== ======
In the Services segment, customer revenue decreased 18% to $1.13 billion in
the second quarter of 2000 from $1.38 billion in the second quarter of 1999
as a slight increase in outsourcing revenue was more than offset by a decline
in systems integration and repeatable solutions. Proprietary maintenance
revenue, which continues to decline industry wide, declined more than in
prior periods, reflecting customers higher rates of replacement of older
equipment last year with newer systems that are under warranty and require
less maintenance. The gross profit percent declined to 20.5% in the current
quarter compared to 25.1% in the prior period, principally reflecting reduced
utilization of resources due to lower revenue levels, as well as a lower mix
of higher-margin systems integration and solutions, and proprietary
maintenance revenue in the quarter. Operating income percent declined to
break even in the current quarter from 8.2% last year, principally due to the
gross profit decline.
In the Technology segment, customer revenue decreased 9% to $468 million in
the second quarter of 2000 from $516 million in the prior-year period,
reflecting a decline in ClearPath enterprise server revenue. The current
quarter comparison was difficult because the June 1999 quarter reflected
strong revenue levels associated with spending by customers in preparation
for the year 2000 transition. The gross profit percent was 44.1% in 2000,
compared to 46.8% in 1999, due in large part to a lower percentage of
enterprise server sales in the current quarter. Operating profit in this
9
segment declined to 13.4% in 2000 compared to 18.4% in 1999, principally due
to the gross profit decline.
Interest expense for the three months ended June 30, 2000 was $18.7 million
compared to $34.7 million for the three months ended June 30, 1999. The
decline was principally due to the company's debt reduction program and the
effects of interest rate swaps discussed below.
Other income (expense), net, which can vary from quarter to quarter, was
income of $23.9 million in the current quarter compared to an expense of
$17.0 million in the year-ago quarter. The change was primarily due to
higher equity income in the current period versus a year ago.
Income before income taxes was $85.3 million in the second quarter of 2000
compared to $182.5 million last year. The provision for income taxes was
$29.0 million in the current period (34% effective rate)compared to $64.5
million in the year-ago period (35% effective rate). The decline in the
effective tax rate was principally due to tax planning strategies.
For the six months ended June 30, 2000, net income was $143.0 million, or
$.45 per diluted common share, compared to net income of $227.9 million, or
$.69 per diluted common share, last year. The current period includes an
extraordinary item for the early extinguishment of debt of $19.8 million, or
$.06 per diluted common share. Excluding this item, income in the current
period was $162.8 million, or $.51 per diluted common share.
In December 1999, the Securities and Exchange Commission's ("SEC") staff
issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." SAB No. 101 provides the staff's views in applying
generally accepted accounting principles to selected revenue recognition
issues and is effective for the company in the first quarter of 2000.
However, in March and again in June 2000, in response to requests from a
number of groups asking for additional time to determine the effect, if any,
on registrants' revenue recognition practices, the SEC staff delayed the
implementation date of SAB No. 101. SAB No. 101 now must be implemented by
the company no later than the fourth quarter of 2000 effective as of the
first quarter of 2000. In addition, the SEC staff is expected to issue a
Frequently Asked Questions ("FAQ") document which is expected to clarify and
elaborate on the SEC staff's views regarding revenue recognition. However,
the SEC staff has not yet issued the FAQ document. The company's initial
assessment of the impact of SAB No. 101 is that it would not have a material
effect on its consolidated financial position, consolidated results of
operations, or liquidity. However, the company will reassess the impact of
SAB No. 101 when the FAQ document is issued.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement, which is effective for the year beginning January 1, 2001,
establishes accounting and reporting standards for derivative instruments and
for hedging activities. SAFS No. 133 was amended by SFAS No. 138 in June
2000. SFAS No. 133 requires a company to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. Management is evaluating the impact this
statement may have on the company's financial statements.
10
Financial Condition
- -------------------
Cash and cash equivalents at June 30, 2000 were $182.5 million compared to
$464.0 million at December 31, 1999. During the six months ended June 30,
2000, cash used for operations was $109.9 million compared to cash provided
by operations of $131.7 million a year ago, primarily reflecting a decline in
profitability, higher receivable levels due in part to a higher percentage of
sales late in the second quarter, and a reduction in payables.
Cash used for investing activities during the first six months of 2000 was
$103.6 million compared to $148.9 million during the first half of 1999.
During the current period, both proceeds from investments and purchases of
investments, which represent primarily foreign exchange hedging contract
activity, declined from the prior year as a result of extending the duration
of individual contracts to more closely match the timeframe of related
underlying exposures. This change in duration of foreign currency contracts
did not significantly impact net cash flows. In addition, the current period
reflects lower cash usage for purchases of businesses and, as described
below, $27.5 million proceeds from the termination of the euro swap.
Cash used for financing activities during the six months ended June 30, 2000
was $56.6 million compared to cash usage of $142.7 million in the year-ago
period. The current period includes net proceeds from short-term borrowings
of $354.3 million principally due to borrowings used to repay long-term debt
of $444.6 million, as described below. Included in the prior period were
payments of $181.9 million for redemptions of preferred stock and $47.0
million for preferred stock dividends.
Total debt was $938.2 million at June 30, 2000 down $61.8 million from $1.0
billion at December 31, 1999.
The company has a $400 million credit agreement which expires June 2001. As
of June 30, 2000, $165.0 million was outstanding under this agreement at an
average rate of 8.1%.
On April 15, 2000, the company redeemed all of its $399.5 million outstanding
12% senior notes due 2003 at the stated redemption price of 106% of
principal. As a result, the company recorded an extraordinary after-tax
charge of $19.8 million, or $.06 per diluted share, in the second quarter of
2000 for the call premium and unamortized debt expense. During the March
2000 quarter, the company entered into an additional $150 million credit
agreement expiring April 2001 for the purpose of funding this redemption. As
of June 30, 2000, the entire amount was borrowed under this agreement at a
rate of 7.5%. The redemption was funded through a combination of cash and
short-term borrowings under the company's two credit agreements.
The company may, from time to time, redeem, tender for, or repurchase its
securities in the open market or in privately negotiated transactions
depending upon availability, market conditions, and other factors.
11
In the third quarter of 1999, the company entered into interest rate swaps
and currency swaps for Euros and Japanese yen. The currency swaps were
designated as hedges of the company's net investments denominated in these
currencies. In May 2000, the company terminated the Euro currency swap and
received $27.5 million. A gain of $.9 million was recorded on the
termination. With the Japanese yen currency swap, the company is obligated
to deliver on April 1, 2008, 23.2 billion yen in exchange for $200 million.
At June 30, 2000, the company has a payable of $18.4 million included in
other liabilities (long-term) related to the yen currency swap.
The interest rate swaps convert the interest rate on the company's $200
million 7 7/8% senior notes due 2008 and $200 million of its 11 _% senior
notes due 2004 to a U.S. libor rate. With the yen currency swap, the company
pays an interest rate based on Japanese libor in exchange for U.S. libor
interest rate. The effective interest rate for the company on its swaps is
U.S. libor plus 5.12% and yen libor plus .40%, representing 11.895% and
0.55125% at June 30, 2000, respectively.
The company has on file with the Securities and Exchange Commission an
effective registration statement covering $700 million of debt or equity
securities, which enables the company to be prepared for future market
opportunities.
At June 30, 2000, the company had deferred tax assets in excess of deferred
tax liabilities of $1,381 million. For the reasons cited below, management
determined that it is more likely than not that $1,084 million of such assets
will be realized, therefore resulting in a valuation allowance of $297
million.
The company evaluates quarterly the realizability of its deferred tax assets
and adjusts the amount of the related valuation allowance, if necessary. The
factors used to assess the likelihood of realization are the company's
forecast of future taxable income, and available tax planning strategies that
could be implemented to realize deferred tax assets. Approximately $3.2
billion of future taxable income (predominantly U.S.) is needed to realize
all of the net deferred tax assets. Failure to achieve forecasted taxable
income might affect the ultimate realization of the net deferred tax assets.
See "Factors That May Affect Future Results" below.
Stockholders' equity increased $163.2 million during the six months ended
June 30, 2000, principally reflecting net income of $143.0 million and $52.3
million for issuance of stock under stock option and other plans offset in
part by currency translation of $32.1 million.
Conversion to the Euro Currency
- -------------------------------
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency (the "euro"). The transition period for the
introduction of the euro began on January 1, 1999. The company is addressing
the issues involved with the introduction of the euro. The more important
issues facing the company include converting information technology systems,
reassessing currency risk, and negotiating and amending agreements. Based on
12
progress to date, the company believes that the use of the euro will not have
a significant impact on the manner in which it conducts its business.
Accordingly, conversion to the euro is not expected to have a material effect
on the company's consolidated financial position, consolidated results of
operations, or liquidity.
Factors That May Affect Future Results
- --------------------------------------
From time to time, the company provides information containing "forward-
looking" statements, as defined in the Private Securities Litigation Reform
Act of 1995.
All forward-looking statements rely on assumptions and are subject to risks,
uncertainties, and other factors that could cause the company's actual
results to differ materially from expectations. In addition to changes in
general economic and business conditions and natural disasters, these
include, but are not limited to, the factors discussed below.
The company operates in an industry characterized by aggressive competition,
rapid technological change, evolving technology standards, and short product
life-cycles.
Future operating results will depend on the company's ability to design,
develop, introduce, deliver, or obtain new products and services on a timely
and cost-effective basis; on its ability to effectively execute its sales
efforts under the organizational model implemented at the beginning of 2000;
on its ability to mitigate the effects of competitive pressures and
volatility in the information services and technology industry on revenues,
pricing and margins; on its ability to effectively manage the shift of its
business mix away from traditional high-margin product and services
offerings; and on its ability to successfully attract and retain highly
skilled people. In addition, future operating results could be impacted by
market demand for and acceptance of the company's service and product
offerings.
Certain of the company's systems integration contracts are fixed-price
contracts under which the company assumes the risk for delivery of the
contracted services at an agreed-upon price. Future results will depend on
the company's ability to profitably perform these services contracts and bid
and obtain new contracts.
The company frequently forms alliances with third parties that have
complementary products, services, or skills. Future results will depend in
part on the continuing relationships with, and on the performance and
capabilities of, these third parties. Future results will also depend upon
the ability of external suppliers to deliver components at reasonable prices
and in a timely manner and on the financial condition of, and the company's
relationship with, distributors and other indirect channel partners.
Approximately 59% of the company's total revenue derives from international
operations. The risk of doing business internationally include foreign
currency exchange rate fluctuations, changes in political or economic
conditions, trade protection measures, and import or export licensing
requirements.
13
Part II - OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings
- ------- -----------------
As previously reported, most recently in the company's Quarterly Report on
Form 10-Q for the period ended March 31, 2000, a number of purported class
action lawsuits seeking unspecified compensatory damages have been filed
against Unisys and various current and former officers in the U.S. District
Court for the Eastern District of Pennsylvania by persons who acquired Unisys
common stock during the period May 4, 1999 through October 14, 1999. On
February 16, 2000, these actions, which are in the early stages, were
consolidated under the caption In re: Unisys Corporation Securities
Litigation. The plaintiffs allege violations of the Federal securities laws
in connection with statements made by the company concerning certain of its
services contracts. The company believes it has meritorious defenses and
intends to defend this action vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
(a) The company's 2000 Annual Meeting of Stockholders (the "Annual
Meeting") was held on April 27, 2000 in Philadelphia, Pennsylvania.
(b) The following matters were voted upon at the Annual Meeting and
received the following votes:
1. Election of Directors as follows:
Gail D. Fosler - 265,580,329 votes for; 2,636,356 votes withheld
Melvin R. Goodes - 265,369,335 votes for; 2,847,350 votes withheld
Rajiv L. Gupta - 265,369,327 votes for; 2,847,358 votes withheld
Edwin A. Huston - 265,500,466 votes for; 2,716,219 votes withheld
2. A proposal to ratify the selection of the company's independent
auditors - 266,292,209 votes for; 1,924,476 votes against;
1,056,614 abstentions
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, the company filed no
Current Reports on Form 8-K.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNISYS CORPORATION
Date: July 27, 2000 By: /s/ Janet M. Brutschea Haugen
-----------------------------
Janet M. Brutschea Haugen
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10 Amendment, effective April 26, 2000, to the Unisys Corporation
Director Stock Unit Plan
11.1 Statement of Computation of Earnings Per Share for the six months
ended June 30, 2000 and 1999
11.2 Statement of Computation of Earnings Per Share for the three months
ended June 30, 2000 and 1999
12 Statement of Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
AMENDMENT TO THE UNISYS CORPORATION
DIRECTOR STOCK UNIT PLAN
Section 5(D) is amended and restated in its entirety, effective April 26, 2000,
to read as follows:
"(D) Any amounts distributed under the Plan on or after April 26,
2000, shall be distributed in the form of shares of common
stock of the Corporation."
UNISYS CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Millions, except share data)
2000 1999
----------- -----------
Basic Earnings Per Common Share
Income before extraordinary item $ 162.8 $ 227.9
Less dividends on preferred shares ( 34.8)
----------- -----------
Income available to common stockholders
before extraordinary item $ 162.8 $ 193.1
Extraordinary item (19.8)
----------- -----------
Net income available to common stockholders $ 143.0 $ 193.1
=========== ===========
Weighted average shares 311,837,691 268,425,000
=========== ===========
Basic earnings per share
Before extraordinary item $ .52 $ .72
Extraordinary item (.06)
----------- -----------
Total $ .46 $ .72
=========== ===========
Diluted Earnings Per Common Share
Income available to common stockholders
before extraordinary item $ 162.8 $ 193.1
Plus impact of assumed conversions
Interest expense on 8 1/4% Convertible
Notes due 2006, net of tax - .3
----------- -----------
Income available to common stockholders
plus assumed conversions before
extraordinary item 162.8 193.4
Extraordinary item (19.8)
----------- -----------
Net income available to common stockholders $ 143.0 $ 193.4
=========== ===========
Weighted average shares 311,837,691 268,425,000
Plus incremental shares from assumed
conversions
Employee stock plans 5,212,717 10,447,720
8 1/4% Convertible Notes due 2006 1,635,709
Preferred stock 1,321,571
----------- -----------
Adjusted weighted average shares 317,050,408 281,830,000
=========== ===========
Diluted earnings per share $ $
Before extraordinary item .51 .69
Extraordinary item (.06)
----------- -----------
Total $ .45 $ .69
=========== ===========
The average shares listed below were not included in the computation of diluted
earnings per share because to do so would have been antidilutive for the periods
presented.
Series A preferred stock 36,845,825
UNISYS CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Millions, except share data)
2000 1999
----------- -----------
Basic Earnings Per Common Share
Income before extraordinary item $ 56.3 $ 118.0
Less dividends on preferred shares ( 12.0)
----------- -----------
Income available to common stockholders
before extraordinary item 56.3 106.0
Extraordinary item (19.8)
----------- -----------
Net income available to common stockholders $ 36.5 $ 106.0
=========== ===========
Weighted average shares 312,514,684 274,146,000
=========== ===========
Basic earnings per share
Before extraordinary item $ .18 $ .39
Extraordinary item (.06)
----------- -----------
Total $ .12 $ .39
=========== ===========
Diluted Earnings Per Common Share
Income available to common stockholders
before extraordinary item $ 56.3 $ 106.0
Extraordinary item (19.8)
----------- -----------
Net income available to common stockholders $ 36.5 $ 106.0
=========== ===========
Weighted average shares 312,514,684 274,146,000
Plus incremental shares from assumed
conversions
Employee stock plans 4,506,461 10,383,111
Preferred stock 1,298,889
----------- -----------
Adjusted weighted average shares 317,021,145 285,828,000
=========== ===========
Diluted earnings per share
Before extraordinary item $ .18 $ .37
Extraordinary item (.06)
----------- -----------
Total $ .12 $ .37
=========== ===========
The average shares listed below were not included in the computation of diluted
earnings per share because to do so would have been antidilutive for the periods
presented.
Series A preferred stock 31,825,822
UNISYS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
($ in millions)
Six
Months
Ended Years Ended December 31
June 30, -----------------------------------
2000 1999 1998 1997 1996 1995
-------- ---- ---- ---- ---- ----
Fixed charges
Interest expense $ 39.2 $127.8 $171.7 $233.2 $249.7 $202.1
Interest capitalized during
the period 5.7 3.6 - - - -
Amortization of debt issuance
expenses 2.0 4.1 4.6 6.7 6.3 5.1
Portion of rental expense
representative of interest 23.1 46.3 49.1 51.8 59.8 65.9
------ ------ ------ ------ ------ ------
Total Fixed Charges 70.0 181.8 225.4 291.7 315.8 273.1
------ ------ ------ ------ ------ ------
Earnings
Income (loss) from continuing
operations before income taxes 246.7 770.3 594.2 (748.1) 80.2 (786.0)
Add (deduct) share of loss
(income) of associated
companies (17.7) 8.9 (.3) 5.9 (4.9) 5.0
------ ------ ------ ------ ------- ------
Subtotal 229.0 779.2 593.9 (742.2) 75.3 (781.0)
------ ------ ------ ------ ------- ------
Fixed charges per above 70.0 181.8 225.4 291.7 315.8 273.1
Less interest capitalized during
the period (5.7) (3.6) - - - -
------ ------ ------ ------ ------ -------
Total earnings (loss) $293.3 $957.4 $819.3 $(450.5)$391.1$(507.9)
====== ====== ====== ======= ====== =======
Ratio of earnings to fixed
charges 4.19 5.27 3.63 * 1.24 *
====== ====== ====== ======= ====== =======
* Earnings for the years ended December 31, 1997 and 1995 were inadequate
to cover fixed charges by approximately $742.2 and $781.0 million,
respectively.
5
